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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 21ST DAY OF APRIL 2017

BEFORE

THE HON’BLE MR.JUSTICE G.NARENDAR

WRIT PETITION No. 34537/2015 (L-TER)

BETWEEN RAJESH KORAT AGED ABOUT 32 YEARS, 17, 19TH CROSS, 24TH MAIN, OPP. PLAY HOUSE, JP NAGAR, 5TH PHASE, BANGALORE-560078. ... PETITIONER (BY SMT. K SAROJINI MUTHANNA, ADV.) AND MANAGEMENT,

INNOVITI EMBEDDED SOLUTIONS PVT. LTD., NGR THE EDGE, NO.4, 2ND & 3RD FLOOR, 3RD MAIN, 5TH CROSS, SAIBABA MANDIR ROAD, CAMBRIDGE LAYOUT, HALASURU, BANGALORE-560008, BY ITS CEO. ... RESPONDENT (BY SHRI. SMARAN SHETTY, ADV. FOR KEYSTONE PARTNERS, ADVS. )

THIS WP IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE

IMPUGNED ORDER DT. 2.7.2015 AT ANNEX-D PASSED BY THE II ADDL. LABOUR COURT ON I.A.NO.1 IN I.D.NO.87/2014 WITH A DIRECTION TO PROCEED WITH THE DISPUTE IN ACCORDANCE WITH THE INDUSTRIAL DISPUTE ACT 1947 ETC.

THIS WP COMING ON FOR ‘ORDERS’ THIS DAY, THE

COURT MADE THE FOLLOWING:

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ORDER

Heard the learned counsel for the petitioner and

respondent.

2. With the consent of the counsels the matter is

taken up for final disposal.

3. The petitioner is before this court being

aggrieved by the order passed by the II Addl. Labour Court,

Bengaluru dated 2.7.2015 in I.D. No.87/2014 whereby it

was pleased to allow I.A. No.1 preferred under Section 8 of

the Arbitration and Conciliation Act, 1996.

4. It is contended by the petitioner's counsel that

the petitioner joined the services of the respondent on

26.12.2012 and that he was designated as a Programme

Manager. It is further contended that he had to execute

work only as per the instructions of the Reporting Manager

and that the CEO of the company was his Appointing

Authority. It is contended that the petitioner had put in a

blemishless service and has, in fact, been working overtime

and this effort has been appreciated by the Reporting

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Manager himself. It is further contended that his good

work has also been appreciated by the customers. It is

this appreciation of the customers, it is claimed soured the

relationship between the petitioner and the respondent

Manager and that the management construed him as a

potential competitor and from then on, the management

started harassing him in order to force him to voluntarily

quit and thereby escape its legal liabilities. The petitioner

has also detailed the harassment meted out to him which

is not relevant for determination of the point that arises in

this petition.

5. The learned counsel for the petitioner would

also detail the various safeguard and security system

adopted by the respondents to prevent unauthorized

dissipation of their business processes. That the petitioner

by letter dated 20.04.2015 addressed to the management

and set out the reasons for failure of certain ventures and

in that he contended that he alone cannot be fastened with

the liability of the failures and the burden has to be borne

by the entire team and thereafter he expressed his desire

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to resign. That on 14.03.2014 he received a mail from the

management stating that he needs to be put on a

performance improvement plan which the petitioner

construed as a precursor to his removal and by the said

mail he was also put on notice that if he was not able to

meet the PIB target he was required to leave the

organization. It is submitted that the petitioner was

frustrated and tendered his formal resignation on

18.04.2014 in compliance with the terms and conditions of

his appointment. Despite the tendering of the resignation

letter, the respondent Management continued the

harassment and that they neither relieved him nor gave a

letter of acceptance. That instead the respondent

proceeded to alter his service condition by re-designating

him as a Operations Manager which was protested to by

the petitioner stating that they could not have altered the

job profile without his consent. That on 22.04.2014 the

petitioner received a communication from the respondent

asking him to return the company assets including laptop,

mobile, Access Card, I.D. Card and companies confidential

information and that he was accused of gross indiscipline

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and acting against the companies interest and it was also

alleged that he had stolen companies confidential

information and hence, the respondent management was

compelled to initiate disciplinary action. Thereafter, the

management, without considering the replies and

explanations offered by the petitioner, proceeded to issue a

termination letter and also got filed a complaint with the

local police authorities and that one employee of a

company orally agreed to issue the formal relieving order

withdrawal of the police complaint and payment till 10th of

January 2014 and also a letter recalling the termination

order dated 23.04.2014 and on the said promise the

petitioner handed over the companies assets in his

possession. That the respondent management issued a

stigmatic order of termination without holding any enquiry

or affording any opportunity and that as a consequence of

the said stigmatic order, the petitioner's chances of

reemployment was totally wiped out.

6. Aggrieved he approached the Labour

Commissioner and that despite several conciliation

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meetings held, the efforts failed due to the non-cooperative

attitude of the management and a failure report dated

21.08.2014 came to be issued.

7. Thereafter, the petitioner approached the Labour

Court under the provisions of Section 10 (4-A) read with

Section 2 A (2) of the Industrial Disputes Act and the same

is registered as I.D. No.87/2014. That on the first date of

hearing, the management indicated settlement of the

dispute and on the next date of hearing also the

management adopted the same stand. The said offer was

also made during the conciliation proceedings. But, as the

offer constituted only 50% of the sum that he had legally

earned the petitioner declined the same and it is thereafter

the management filed its counter statement on the 3rd

hearing i.e. on 22.12.2014. Thereafter, the application I.A.

No.1 came to be filed invoking the provisions of Section 8

of the Arbitration and Conciliation Act, 1996.

8. Per contra, the learned counsel for the

respondent would contend that the Labour Court has

rightly appreciated the contention and upheld the

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applicability of the provisions of Section 8 of the

Arbitration and Conciliation Act, 1996 to the proceedings

before the Labour Court. He would contend that the

Arbitration and Conciliation Act is a special enactment and

it applies in all vigor in any proceedings before any judicial

authority and that the Labour Court undoubtedly being a

judicial authority, the provisions of Section 8 of the Act

squarely applies to the proceedings pending before the

labour court.

9. He would also contend that the respondent is a

market leader in the payment solution industry and as

such, is required to cautiously guard its trade secrets

including internal technology and business methods and

he also rejects the allegation of harassment or illegal

termination.

10. The learned counsel for the respondent would

contend that the impugned order is supported by sound

reasoning and hence, does not call for any intervention.

The learned counsel for the respondent would also rely on

catena of judgments and more particularly the law laid

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down by the Apex Court in Booz Allien and Hamilton Inc

vs. SBI Home Finance Limited and Others and he would

contend that the law laid down by the Apex Court that all

issues or disputes relating to right-in-rem alone are

required to be adjudicated by the courts and tribunals and

also right-in-personam are suitable for adjudication by

arbitration and he would draw the attention of this court

to para 35 and 36 wherein the Hon'ble Apex Court has

enumerated certain variety of disputes which are amenable

to the jurisdiction of the Arbitration and Conciliation Act.

He even contends that the present dispute between the

petitioner and the respondent is one such which meets the

parameters of suitability of adjudication by Arbitration.

11. In the above background of facts and

circumstances and law, the question that falls for

determination is;

Whether the provisions of Section 8 of the Arbitration

and Conciliation Act, 1996 apply to proceedings pending

before the labour court?

OR

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Whether the provisions of Section 10 A (5) of the Act

ousts the jurisdiction of the Arbitration Act in respect of

proceedings pending before the labour court.

12. The Industrial Disputes Act, 1947 and the

Arbitration and Conciliation Act, 1996 are no doubt special

enactments. But, on a comparative basis it is seen that

the Industrial Disputes Act is restricted in its operation

and relates only to issues revolving around and involving a

workman. A perusal of the Act would demonstrate that

the Act is a beneficial piece of legislation and a social

legislation enacted for the purpose of ameliorating the

conditions of a workman. In fact, the object of the Act as

stated is as follows:-

“An Act to make provision for the

investigation and settlement of Industrial

Disputes and for certain other purposes.

Whereas it is expedient to make provision for

the investigation and settlement of Industrial

Disputes, and for certain other purposes herein

after appearing.”

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It is hereby enacted as follows:-

Thus what can be gleaned from the stated objective

of the Act is that the purpose of the enactment is to make

provisions for investigation and settlement of Industrial

Disputes which form a class of litigation, by themselves.

Further, a reading of the various provisions under the

various chapters of the Act would reveal that the Act has

made provisions which govern every facet that is required

to achieve the stated objective.

13. The Chapter-1 provides the definitions under

Section-2 and Section 2-A a deeming provision which came

to be inserted by Act 35 of 1955 states that the dismissal

of an individual workman shall be deemed to be an

Industrial Dispute.

14. Chapter-2 provides for conciliation,

appointment of conciliation officers, constitution of Courts

of Enquiry, constitution of Labour Courts, Tribunals,

National Tribunals and qualification for the purpose of

selecting Presiding Officers and filling up of vacancies etc.

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Chapter-2B provides for a setting up of a Grievance

Redressal Machinery.

15. Chapter-3 provides for the reference of disputes

to the Boards, Courts or Tribunals by the appropriate

Government and also voluntary reference of disputes of

arbitration under provisions of Section 10-A. It is also

interesting to note that Sub-Section 5 of Section 10-A

specifically ousts the application of the provisions of the

Arbitration Act, 1940 to Arbitration under the said section.

16. The Act also provides for the procedure, powers

and duties of the various authorities under the Act. It also

defines various offences and also provides for the

penalties. Chapter-7 provides for miscellaneous aspects

under the Act including vesting powers on the

Courts/Tribunal to enforce the orders passed by the Court.

Thus, not only is the Courts/Tribunal constituted under

the Act is conferred with original jurisdiction but,

additionally vested with the powers of an Executive Court.

To state in a nutshell, the Act is a self contained Act

irrespective of the nature of dispute and once the dispute

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answers the description of an Industrial Dispute, the

provisions of the Industrial Disputes Act, 1947 become

applicable. This conclusion, draws sustenance from a

combined reading of the provisions of Section 2-B, 2-E and

2-F to mean a Conciliation Officer appointed under this

Act, a conciliation proceeding to mean a proceeding held

by a Conciliation Officer or Board under the Act and finally

defines a Court to mean a Court of Inquiry constituted

under the Act. Thus, the Act not only provides for the

entire mechanism for addressing the issue of Industrial

Dispute but the legislature has proceeded further and has

specifically provided for the exclusion of the application of

the Arbitration Act to disputes raised under the Industrial

Disputes Act.

17. The learned counsel for the petitioner would

also place reliance on the rulings of the Hon’ble Apex Court

reported in 1983 LAB. I. C. 1694 in the case of Jai

Bhagwan V. Management of the Ambala Central Co-

operative Bank Ltd., wherein the Hon’ble Apex Court has

held as follows:-

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“Shri Rohatgi, learned counsel for the

Respondent Bank, was unable to contend

that there was even a remote compliance

with the principles of natural justice. He

was also unable to urge that the Industrial

Tribunal had truly applied his mind to the

case. He, however, argued that the appellant

had a remedy against the order of

termination of services by way of an appeal

to the Board of Management and that his

failure to pursue that remedy barred him

from raising any Industrial dispute. He also

attempted to connect the order of

termination of services with the absence of

the workman from the bank on August 13

and 14, 1974, on days when his signature

was found in the attendance register. We

see no substance in either of the

submissions. Raising an industrial dispute

is a well recognized and legitimate mode of

redress available to a workman, which has

achieved statutory recognition under the

Industrial Disputes Act and we fail to see

why the statute-recognised mode of redress

should be denied to a workman because of

the existence or availability of another

remedy. Nor are we able to understand how

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an Industrial Tribunal to whom a dispute

has been referred for adjudication can refuse

to adjudicate upon it and surrender

jurisdiction which it undoubtedly has to

some other authority. While the Government

may exercise their discretion in deciding

whether to refer or not to refer a dispute for

adjudication, the Tribunal to whom the

dispute has been referred has no discretion

to decide whether to adjudicate or not. Once

a reference has been properly made to an

Industrial Tribunal, the dispute has to be

duly resolved by the Industrial Tribunal.

Resolution of the dispute cannot be avoided

by the Tribunal on the ground that the

workman had failed to pursue some other

remedy. The attempt of Shri Rohatgi to

connect the order terminating the

appellant’s services with his absence from

the bank on August 13 and 14, 1974 is an

attempt made before us for the first time. At

no earlier stage was the order of termination

of services sought to be sustained on the

basis of the absence of the workman from

the bank on August 13 and 14, 1974. It

cannot be done now.”

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18. From the above it can be discerned that the full

bench of the Hon’ble Apex Court has laid down two

prepositions of law, one that a workmen cannot be driven

to seek redress elsewhere because of the existence or

availability of another remedy and raising an Industrial

Dispute is a well recognized and legitimate mode of redress

and is one which has achieved statutory recognition under

the Industrial Disputes Act; secondly, no discretion is

vested in the Industrial Tribunal to avoid resolution of the

dispute once the reference is validly made.

19. Per contra, the learned counsel for the

respondent has placed reliance on the catena of judgments

to underscore the point of applicability of the provisions of

Arbitration and Conciliation Act, 1996 in respect of

proceedings pending before the Industrial Tribunal and

would endeavour to sustain the order passed on I.A. No.1

whereby the Industrial Tribunal has stayed its own

proceedings in order to enable the respondent to refer the

matter to Arbitration.

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20. He firstly relied on the ruling of the Hon’ble

Apex Court in the case of Rashtriya Ispat Nigam Ltd. V.

Verma Transport Co. reported in (2006) 7 SCC 275. In the

said judgment the Hon’ble Apex Court was examining the

scope of Section 8(1) of the Arbitration and Conciliation

Act, 1996 and was pleased to hold that the objection

regarding restriction to invoke Section 8(1) of the

Arbitration and Conciliation Act, 1996 is up to the point of

filing of the first statement on the substance of the

dispute. It is seen that the issue was a matter arising out

of a commercial contract relating to illegal termination of

the contract. In the facts and circumstances and the law

involved therein finding is rendered without reference to

the provisions of the Industrial Disputes Act. In the second

ruling reported in (2000) 4 SCC 539 in the case of P.

Anand Gajapathi Raju and Others Vs. P.V.G. Raju (Dead)

and Others, the Hon’ble Apex Court was pleased to hold

that where the matter is subject matter of Arbitration

agreement, the said subject matter is required to be

adjudicated by arbitration and once the reference is made

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to arbitration under Section 8 of the Arbitration and

Conciliation Act, 1996. The proceedings in civil action

stands disposed off and that there is no question of stay of

pending conclusion of the arbitration. It is to be noted that

the impugned order is contrary to the very ruling itself. It

is not in dispute that the tribunal has no power to stay its

own proceedings nor is it vested WITH the jurisdiction to

refer the dispute to arbitration and on the contrary, in the

light of the authoritative pronouncement of the Hon’ble

Apex Court in the case of Jai Bhagwan V. Management of

the Ambala Central Co-operative Bank Ltd., and Jai

Bhagwan Vs State of Haryana and another, it is

mandatory upon the Industrial Tribunal to hear and

decide the reference. Yet again the reliance is placed on

other ruling of the Hon’ble Apex Court i.e. in (2003) 6 SCC

503 in Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity

Midway Petroleums by the said ruling the Hon’ble Apex

Court has held that once the existence of an Arbitration

Clause brought to the notice of the civil court, it was

mandatory upon the civil court to refer the dispute to

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Arbitration. The civil court has no jurisdiction to continue

with the suit once the application under Section 8 of the

Arbitration and Conciliation Act, 1996 has been filed. The

Hon’ble Apex Court was dealing with the case arising out

of Weights and Measures (Enforcement) Act, 1985 similar

are the rulings reported in (2007) 3 SCC 686 in the case of

Agri Gold Exims Ltd. Vs Sri. Lakshmi Knits & Wovens and

Others. The said rulings have been rendered without

reference to the bar proclaimed under the Industrial

Disputes and law settled by the Hon’ble Apex Court with

regard to the scope and jurisdiction of the Industrial

Tribunal with regard to a validly made reference. Hence in

the humble opinion of this court, are inapplicable to the

case on hand.

21. The learned counsel for the respondent would

place reliance on other ruling of the Hon’ble Apex Court

reported in (2011) 5 SCC 532 in Booz Allean and Hamilton

Inc. Vs. SBI Home Finance Limited and Others, where the

Hon’ble Apex Court had the occasion to define the

“Arbitrability” of dispute and it was pleased to hold that all

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disputes related to rights in rem are required to be

adjudicated by the courts and public tribunals, being

unsuited for (private) arbitration. It further held that right

in personam can be adjudicated by the Arbitral Tribunal.

It is useful to refer to the observations of the Hon’ble Apex

Court at paragraph 34, 35 and 36.

“34. The term “arbitrability” has different

meanings in different contexts. The three facets

of arbitrability, relating to the jurisdiction of the

Arbitral Tribunal, are as under:

(i) Whether the disputes are capable

of adjudication and settlement by

arbitration? That is, whether the disputes,

having regard to their nature, could be

resolved by a private forum chosen by the

parties (the Arbitral Tribunal) or whether

they would exclusively fall within the

domain of public fora (courts).

(ii) Whether the disputes are covered

by the arbitration agreement? That is,

whether the disputes are enumerated or

described in the arbitration agreement as

matters to be decided by arbitration or

whether the disputes fall under the

“excepted matters” excluded from the

purview of the arbitration agreement.

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(iii) Whether the parties have referred

the disputes to arbitration? That is,

whether the disputes fall under the scope

of the submission to the Arbitral Tribunal,

or whether they do not arise out of the

statement of claim and the counterclaim

filed before the Arbitral Tribunal. A

dispute, even if it is capable of being

decided by arbitration and falling within

the scope of arbitration agreement, will

not be “arbitrable” if it is not enumerated

in the joint list of disputes referred to

arbitration, or in the absence of such joint

list of disputes, does not form part of the

disputes raised in the pleadings before the

Arbitral Tribunal.

35. The Arbitral Tribunals are private fora

chosen voluntarily by the parties to the dispute,

to adjudicate their disputes in place of courts

and tribunals which are public fora constituted

under the laws of the country. Every civil or

commercial dispute, either contractual or non-

contractual, which can be decided by a court, is

in principle capable of being adjudicated and

resolved by arbitration unless the jurisdiction of

the Arbitral Tribunals is excluded either

expressly or by necessary implication.

Adjudication of certain categories of proceedings

are reserved by the legislature exclusively for

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public fora as a matter of public policy. Certain

other categories of cases, though not expressly

reserved for adjudication by public fora (courts

and tribunals), may by necessary implication

stand excluded from the purview of private fora.

Consequently, where the cause/dispute is

inarbitrable, the court where a suit is pending,

will refuse to refer the parties to arbitration,

under Section 8 of the Act, even if the parties

might have agreed upon arbitration as the

forum for settlement of such disputes.

36. The well-recognised examples of non-

arbitrable disputes are: (i) disputes relating to

rights and liabilities which give rise to or arise

out of criminal offences; (ii) matrimonial

disputes relating to divorce, judicial separation,

restitution of conjugal rights, child custody; (iii)

guardianship matters; (iv) insolvency and

winding-up matters; (v) testamentary matters

(grant of probate, letters of administration and

succession certificate); and (vi) eviction or

tenancy matters governed by special statutes

where the tenant enjoys statutory protection

against eviction and only the specified courts

are conferred jurisdiction to grant eviction or

decide the disputes.” [emphasis supplied by

me].

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22. From a reading of para 36 it can be safely

inferred that even in respect of certain rights in personam

like tenancy rights etc. the Hon’ble Apex Court has

deemed it fit and necessary that they be decided by the

specified courts. It is not in dispute that the arbitrary

removal or dismissal of workmen from service or changing

of service conditions is against public policy as envisioned

by the legislature in the form of Industrial Disputes Act

and other labour related enactments. Further more, if

such an interpretation is accepted it would not only be

contrary to the bar under the provisions of the Industrial

Disputes act but would also amount to defeating the very

objective and spirit of the Industrial Disputes Act which is

not only special enactment but also a social legislation.

23. The learned counsel for the respondent would

attempt to convince the court regarding the applicability

and invocation of Section 8 of the Arbitration and

Conciliation Act in respect of proceedings before the

Industrial Tribunal. In this regard he would place the

ruling of the Hon’ble Apex Court reported in 1963

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Supplement (1) SCR 625 in the case of Engineering

Mazdoor Sabha and Another Vs Hind Cycles Limited. That

was a case where the parties had voluntarily referred the

dispute to the arbitrator under the provisions of Section 10

(a) of the Industrial Disputes Act. In the said case the

court was dealing with the issue of maintainability of the

appeal by Special Leave by invoking the provisions of

Article 136 as against an award by an Arbitrator passed

under Section 10 (a) of the Industrial Disputes Act.

24. It is seen that the respondent has not called in

question the reference made by the Government by

invoking the provisions of Industrial Disputes Act and the

order of reference has become final by the respondent

accepting the same. Assuming for argument sake that the

dispute between the parties was in fact arbitrable, the said

right existed only till the date of passing of the order by the

Government, referring the dispute to the Tribunal. Once

the order of reference was made by the Government and in

the light of the law laid down by the Hon’ble Apex Court as

stated supra in Jai Bhagwan V. Management of the Ambala

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Central Co-operative Bank Ltd., the Industrial Tribunal has

no scope to entertain a prayer under Section 8 of the

Arbitration and Conciliation Act as it is mandated by the

Hon’ble Apex Court that the Tribunal must pass an award

either way resolving the dispute.

Hence, the following :-

ORDER

1) The writ petition is allowed.

2) Order passed by the II Addl. Labour Court,

Bengaluru dated 02.07.2015 on I.A. No.I in I.D.

No.87/2014 is set aside and the II Addl. Labour

Court, Bengaluru is directed to continue the

proceedings from the stage on which order dated

02.07.2015 came to be passed.

Sd/- JUDGE

CT-HR

Chs*